Wang Jingbo
It seems that none of the mainstream international investment banks are "buying high and selling low" in the commodities market.
Yesterday, Goldman Sachs reduced its return expectations for commodities over the next 12 months but raised its return expectations for crude oil and gold, recommending investors to increase their allocation to raw materials assets. Jeffrey Currie, head of commodities research at the firm, stated in a report that due to the rise in commodity prices this year, they have reduced their overall return expectation for commodities from the previous 15% to 12%. However, the bank maintained its forecast for Brent crude oil at $127.50 per barrel and gold at $1940 per ounce.
The S&P GSCI index, which tracks 24 raw materials, shows that commodity prices as a whole have risen by 8.5% since the beginning of the year, reaching a new high in nearly six months. But these developments haven't made mainstream investment banks more bullish on commodities.
Compared with Goldman Sachs' views, Morgan Stanley's outlook on the commodities market was more pessimistic earlier. In a previous report, Morgan Stanley predicted that the average gold price in 2012 would be $1845 per ounce, down 16% from the previous forecast. The average copper price in the New Year is expected to be $8157 per ton, 3% lower than the previous forecast. Meanwhile, the institution remains bearish on the price prospects for lead, nickel, aluminum, and zinc, citing reasons such as oversupply because the global industrial output growth rate this year may be 4.78%, lower than the 5.3% growth rate in 2011. Germany, France, and Italy will see manufacturing contraction under the impact of the debt crisis, leading to a decline in demand for base metals. In a report released externally on the 20th of this month, Morgan Stanley even indicated that due to issues with crude oil supply and slowing demand, crude oil prices might fall in the first half of this year.
Deutsche Bank also cut its expectations for metal prices over the next year last month, mainly due to concerns about the potential deterioration of the global economy and a possible strengthening of the dollar. The bank made the largest cuts to its forecasts for base metal prices, reducing its forecast for the 2012 copper price by 18.8% to $7350 per ton, cutting its nickel price forecast by 19.0% to $18625 per ton, and reducing its aluminum price forecast by 17.8% to $2138 per ton. Deutsche Bank also cut its lead price forecast by 17.4% to $2138 per ton, cut its tin price forecast by 17.5% to $20625 per ton, and cut its zinc price forecast by 12.4% to $2038 per ton.
At the same time, Deutsche Bank announced reductions in its platinum and palladium price forecasts by 18.7% and 12.8% respectively, to $1525 per ounce and $698 per ounce, and cut its silver price forecast by 9.8% to $37 per ounce. Considering the strong rise of the dollar, Deutsche Bank cut its full-year average gold price forecast by 3.9% to $1825 per ounce.
However, investors seem not to see any signs of pessimism in the capital flows in the commodities market since the beginning of the year. So far in 2012, international gold prices have cumulatively risen by about 12%, silver prices have increased by over 22%, copper prices have risen by 11%, US crude oil and Brent crude oil have increased by 6% and 14% respectively, and even agricultural products have rebounded somewhat, with raw sugar and soybeans increasing by approximately 6.6% and 4.3% respectively. Looking at the net long positions of funds in corresponding US commodity futures, most varieties are still favored by capital. As of last week, the non-commercial net long position in NYMEX crude oil futures rose to an 8-month high of over 205,000 contracts, the non-commercial net long position in COMEX copper futures reached a six-month high, and the non-commercial net long position in COMEX gold futures reached 167,000 contracts, compared to 177,000 contracts the previous week, the highest since September last year. The non-commercial net long position in US silver futures has rebounded sharply since the beginning of the year, rising from less than 7,000 contracts to over 25,000 contracts last week. The non-commercial net long position in CBOT soybean futures also rose from almost zero in December last year to 92,000 contracts.
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